Will Governments Restrict Foreign Access to Pandemic Supplies? – with Abraham Newman

As the Covid-19 pandemic unfolds, there is a lurking threat that we can no longer ignore: What happens if countries hoard or even nationalize vital resources to fight the disease? On March 2, according to the New York Times, the White House tried to persuade CureVac, a German company that is working on a Covid-19 vaccine, to move to the United States. A German newspaper claimed that the Trump administration wanted the U.S. to secure sole access to a vaccine, a claim the U.S. and the CureVac both denied. But the German government was rattled; its foreign minister, Heiko Maas, proclaimed that “we cannot allow a situation where others want to exclusively acquire the results of their research.” German Chancellor Angela Merkel met with senior German officials to discuss how to prevent the bid. A few days later, the Global Times, a newspaper owned by the Chinese Communist Party, published an editorial claiming that “the development of a vaccine is a battle that China cannot afford to lose,” arguing that China cannot rely on either Europe or the United States to give it access to a vaccine.

It seems that we may be facing the dangerous prospect of “reverse protectionism,” in which states restrict exports rather than imports, and fight with each other to win control of scarce resources needed to protect their citizens. Just as traditional protectionism deepened the Great Depression, the new protectionism could prolong the Covid-19 pandemic by making it harder for states to fight it, worsening its impact. Even if this doesn’t come to pass, the high level of mutual suspicion currently brewing between states will make it harder to coordinate an international response. Mistrust will reverberate through global supply chains.

Businesses that aren’t in the healthcare sector don’t usually pay much attention to the politics of global health. They should be paying attention now. Few business leaders seem to understand that the coronavirus is not just hitting demand and supply and sending the world into a recession — it is also reshaping the fundamental relationship between states and markets. As states try to protect their citizens, they are becoming far more interventionist. Many of these interventions may last far longer than the crisis itself.

This means that business needs to pay attention to how national governments start to intervene in markets to fight coronavirus. Everything depends on whether governments continue to recognize that they benefit from working together, or whether they instead start to fight with each other over business and the goods that it supplies, turning to a new era of autarkic hoarding.

Henry Farrell and Abraham Newman, “Will Governments Restrict Foreign Access to Pandemic Supplies?,” Harvard Business Review (online), March 23, 2020.

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